The AUDGBP exchange rate was 0.30% higher on Wednesday as the Aussie takes advantage of another full lockdown in Britain. Australia is still seeing restrictions, but the rules are less strict and not nation-wide. The Australian economy also got a boost from stronger services Purchasing Manager’s Index (PMI) figures yesterday, with a reading of 57.
AUDGBP was trading at 0.5710 and is looking to press the December highs of 0.5735.
Australian Economy Boosted by PMI and Iron Ore Prices
Australian PMI numbers for the services sector showed a higher-than-expected 57 reading, compared to expectations of 55.1. The number adds to manufacturing PMIs at three-year highs, while the country’s job growth has also been strong.
Another boost for the Australian dollar has come in the form of surging iron ore prices. Concerns over tighter supply pushed spot prices of ore above the $160 a tonne level on the Dalian commodity exchange. China’s ability to bounce back from the coronavirus without a vaccine should support the Aussie in the year ahead, but there is still risk from the ongoing trade spat between the two countries, which saw China putting tariffs on some agricultural products from Australia.
No Sign of a Quick ounce from the UK
The UK economy is now back in a full lockdown and this will continue to affect the economic numbers and the currency disadvantage versus the Aussie dollar. Today will see the release of the latest services PMI figures and this is expected to show a weak 49.9 figure. This is higher than last month’s number but 50 is seen as the line in the sand for expansion. The UK is skirting this number due to the hit to the travel and hospitality industries and there is no sign of a quick bounce in the UK economy.
A growing number of EU retailers are also reportedly halting deliveries to Britain due to the costs involved in sending packages after Brexit. Companies have said they are unwilling to sign up for VAT in the country. This is on top of news that the disruption has seen Sainsbury’s losing 700 product lines in Northern Ireland, with the company forced to stock goods from a rival.
Boris Johnson’s decision to enforce another full lockdown was a psychological blow for the country, which was already reeling from a Christmas lockdown. Businesses have now pleaded with government to provide larger stimulus packages to avoid business closures and further job losses in hard-hit sectors.
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